By Triana O'Keefe, editor Australian Hotelier
Liquor Act reviews have been conducted across the country, and the tragedies in key hot spots during 2014 have seen on-premise venues under intense scrutiny from governments, media and public interest groups. Lockouts, service restrictions and identification scanners have been imposed in various CBD precincts and venue owners are feeling the pressure.
In the midst of Australia’s changing legislative landscape, regional hotel assets continue to perform well as levels of buyer interest increase. However, agents agree the resurgence has little to do with CBD licensing restrictions.
“I don’t think there is any genuine correlation or has been any fundamental value shift in regional pub values due to the CBD restrictions,” says Sam Handy, Jones Lang LaSalle vice president of investment sales.
“We’ve seen in Newcastle that areas outside of Sydney aren’t immune from these types of restrictions and operators are aware of this. I think the value upswing is largely symptomatic of a lack of quality metropolitan pub stock combined with low interest rates,” he said.
“There has undoubtedly been an improvement in regional pub values and this is attributable to the 48 metropolitan Sydney pub transactions that have occurred this year. There is a dearth of quality metropolitan pub stock available and operators are quite rightly seeking A-grade pub assets in strong regional centres.”
Handy comments he is not surprised by the regional interest as CBD precincts have become a flooded market.
“Sydney pubs are now competing with small bars, restaurants, licensed cafes, clubs and the off-premise liquor trade. The space is becoming very crowded and I can see why some operators might consider certain regional centres to be attractive,” he said.
Ray White Hotels managing director, Andrew Jolliffe comments that regional hotel properties of both pub and accommodation in nature have enjoyed resurgence as a result of three key factors.
“The EBITDA multiplier discount by comparison to metro assets is still a healthy 200-300 basis point minimum spread at the narrowest point; the centralisation of government and private business into regional centres means that areas like Wollongong, Port Macquarie, Wagga Wagga, Newcastle and Dubbo all enjoy diversified and stable economies; and the interest rate level, at cyclical low, is lubricating deal flow right across metro and regional areas,” Jolliffe said.
In the past year Ray White NSW regional hotel expert Blake Edwards has marketed and sold regional hotel assets in The Blue Mountains, The Central Coast, Tenterfield and Wagga Wagga.
“Most recently we sold The Exchange Hotel in Newcastle for a record $9.25m. The Exchange Hotel was purchased by publicly listed pub group, Lantern, who added the asset to other regional hotels in their growing portfolio including existing hotels in Mudgee and Bowral,” Jolliffe said.
“In addition to NSW based regional assets, our Queensland and Northern Territory offices have been active, selling multiple assets in strong regional centres such as Townsville, Cairns and Toowoomba. Areas underpinned by natural resource industry and tourism trade, as well as population growth,” he said.